DENNIS RODMAN, FORMER PROFESSIONAL BASKETBALL PLAYER: It's about showing people that we can actually get along. Let's get along as human beings.

(END VIDEOTAPE)

BLITZER: Karl Penhaul reporting from Beijing.

Happening now: Iraq disintegrating, the bloodiest fighting in years pitting government forces against militants threatening to split the country apart. Will the chaos make al Qaeda stronger?

Terror interrogations. A former CIA lawyer makes disturbing revelations about the controversial techniques used on terror suspects. He says he could have stopped them, but didn't. Why?

And shadow campaign. Hillary Clinton's secret strategy meeting now revealed. What does it tell us about a possible run for the White House?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Fortune in American blood and treasure spent on the war in Iraq, and now fighting inside that battered country is soaring to levels not seen in years. But American troops are no longer players, and there's growing fear al Qaeda is riding the deadly wave sweeping Western Iraq to new levels of power.

Our Pentagon correspondent Barbara Starr is working the story for us.

Barbara, what is the latest? What are you hearing?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, a lot of concern about what is going on, especially in Western Iraq, and concern is underscored by the fear that across the region al Qaeda is on the rise.

(BEGIN VIDEOTAPE)

STARR (voice-over): Fallujah and Ramadi, once bloody battlegrounds for U.S. troops, now ground zero in new violence that threatens to split Iraq apart, Al Qaeda fighters, Sunni tribal chiefs and Shia government forces all fighting for control.

NICHOLAS BURNS, FORMER UNDERSECRETARY OF STATE FOR POLITICAL AFFAIRS: This is as bloody a situation we have seen in Iraq since the terrible years of 2006 and 2007.

STARR: But this time the fight will be the Iraqi government's alone win or lose. U.S. troops pulled out of Iraq two years ago. Republican Senators John McCain and Lindsey Graham say the Obama administration cannot escape its share of the blame for al Qaeda's rise, insisting President Obama withdrew U.S. forces over the objections of his commander. But don't look for that policy to change.

JOHN KERRY, U.S. SECRETARY OF STATE: We are not, obviously, contemplating returning. We're not contemplating puts boots on the ground. This is their fight, but we're going to help them in their fight.

STARR: That help includes satellite images to locate al Qaeda fighters and quicker deliveries of small drones and Hellfire missiles so Iraqi forces can attack those targets. Fallujah and Ramadi are now a patchwork of control between al Qaeda, Sunni tribes and a weak government force.

Iraqi Prime Minister Nouri al-Maliki ordered his troops not to strike residential neighborhoods in Fallujah and appealed to residents and tribes to expel terrorists from the city. The hope is the Sunnis and Shia-led government forces will band together and push out al Qaeda, but there is still a rising threat just across the border.

CHRISTOPHER HILL, FORMER U.S. AMBASSADOR TO IRAQ: There's no question that this problem has some of its most significant roots in Syria. That is, the border is very porous today, more porous than it has been in years, and many of these Sunni fighters who answered the call to come to Syria are now doing their work in places like Iraq and even Lebanon.

(END VIDEOTAPE)

STARR: So an unrestrained al Qaeda back at the top in Iraq, an unrestrained al Qaeda across the border in Syria, thousands of foreign fighters also in that immediate region.

And the issue at hand Wolf, is whether this kind of new capability will be able potentially to strike out at Western targets and the United States. That is a major concern -- Wolf.

BLITZER: As you know, Barbara, the U.S. pulled out all of its troops because the Iraqi government of prime minister Nouri al-Maliki refused the status of forces agreement that would have allowed any residual U.S. troops to be immune from Iraqi prosecution. That was a demand that the U.S. put, the Iraqis rejected it, and that's why all U.S. troops are out.

What do they say at the Pentagon about that decision from Nouri al- Maliki?

STARR: Well, here at the Pentagon, the feeling is very strongly that it was the Iraqis that decided they didn't want to pursue the very agreement you're talking about.

But, look, there are others, especially Republicans on Capitol Hill, Senator McCain, Senator Lindsey Graham, who say that the president also bears some responsibility, that the White House didn't strongly pursue this with the Iraqis, that the White House just made it very clear it was over and done with Iraq and wanted to get out.

People like McCain and Graham say President Obama bears responsibility for what has happened here. But the bottom line, the reality is there was no stomach by the American public for continuing on in Iraq, and that may have truly been the deciding factor.

BLITZER: Yes, same scenario could be unfolding in Afghanistan right now. Senator McCain, by the way, will join us here in THE SITUATION ROOM tomorrow. Barbara, thank you.

We're also following some disturbing new allegations about CIA interrogations of terror suspects. A former lawyer for the CIA is revealing new details about water-boarding, confinement and more of the so-called enhanced interrogation techniques.

Our Brian Todd has been looking into this story for us.

What are you finding out, Brian?

BRIAN TODD, CNN CORRESPONDENT: Wolf, learning more about the intense pressure within the CIA in the weeks after 9/11. Officials there had to do something, anything to stop another possible attack. There came a moment when what became one of the biggest controversies of the war on terror was dropped in one attorney's lap.

(BEGIN VIDEOTAPE)

TODD (voice-over): In the weeks after 9/11, the biggest fear gripping the nation, was another attack around the corner? Inside the CIA, an obsession.

JOHN RIZZO, FORMER CIA ATTORNEY: To prevent another catastrophic attack on the homeland.

TODD: John Rizzo was one of the CIA's top lawyers. How would the agency find out if another attack was coming? The CIA worried one al Qaeda operative in their custody could tell them, Abu Zubaydah, but he wasn't talking.

In his new book, Rizzo writes one of the methods they wanted to try on Zubaydah, water-boarding, depicted in the movie "Zero Dark Thirty." That wasn't the only enhanced interrogation technique they wanted to try. In his book, Rizzo writes of something called the insult slap and cramped confinement, where, in Zubaydah's case, they'd make him curl up in a small box and place an insect in it.

Quote: "Why an insect? The response, Zubaydah hates bugs. It will be something harmless, but he won't know that."

John Rizzo says he was speechless over these ideas and had the power to squelch them. He didn't. The reason? The CIA had just been slammed for being asleep at the switch before 9/11. If there was a second 9/11 in the works, if Zubaydah knew about it and the CIA hadn't gotten the intelligence from him, Rizzo worried -- quote -- "I could not countenance the thought of having to live with that."

BOB BAER, CNN CONTRIBUTOR: Look, with 20/20 hindsight, he should have said no. But when he made the decision people told him that you have got to look at the legality of this in terms of more Americans are going to die if we don't do something.

TODD: Rizzo punted to the Justice Department, which green-lighted some of the techniques. Zubaydah started talking. Rizzo says water- boarding and other enhanced interrogation techniques provided key intelligence leading to the capture of top al Qaeda operatives.

(END VIDEOTAPE)

TODD: Former CIA officer Bob Baer disagrees with that, saying that Zubaydah had previously said he would start to make things up if he was ever brought under those interrogation techniques. Zubaydah is believed to have given some good information and some false leads.

Neither the CIA nor George Tenet, who was CIA director at that time, would comment on John Rizzo's book -- Wolf.

BLITZER: All right, Brian, thanks very much, Brian Todd reporting.

This just coming in to THE SITUATION ROOM. We're now learning that Janet Yellen has enough votes in the United Nations to become confirmed as the first female head of the Federal Reserve in its 100- year history. Her Janet Yellen will succeed Ben Bernanke at the end of the month. Her biggest challenge ahead, weaning the U.S. economy off of a lot of that economic stimulus. Janet Yellen confirmed as the head of the Federal Reserve by the United States Senate.

Still ahead, is the NSA spying on members of Congress? One lawmaker demands an answer and the agency's reply is revealing.

Plus, Hillary Clinton's secret meeting with top Democratic consultants. We have details of what they told her about a possible White House run.

(COMMERCIAL BREAK)

BLITZER: We know it's collecting data on phone calls and e-mails, even spying on some world leaders, but is Congress also a target of NSA surveillance?

One of the lawmakers demanding answers, and I will speak to Senator Bernie Sanders about his letter to the NSA in just a moment.

But, first, our chief national security correspondent Jim Sciutto is here with more on what is going on, including some possible reforms for changes within the NSA.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: That's right.

Well, you will remember the president has promised to give a speech later this month outlining his changes to NSA mass surveillance, so he's been reviewing these 46 recommendations from the intelligence panel. From the indications we're getting from the changes that the administration has signaled its openness to, you get a sense of substantive but not necessarily radical reform of the mass surveillance program.

(BEGIN VIDEOTAPE)

SCIUTTO (voice-over): With a presidential speech planned this month, the administration is preparing a series of reforms to put the NSA under tighter control.

One possible reform would put a public advocate on the secret intelligence court known as the FISA court, where now judges only hear from government lawyers. Another would move telephone metadata from government hands back to the private sector. A congressional source tells CNN one additional prospect would be for the FISA court, located inside this D.C., federal courthouse, to approve searches of the metadata by the NSA and FBI on a case-by-case basis, with the FBI director able to grant quicker approval in emergencies.

Still, critics say that even these changes would leave the government collecting massive amounts of data unnecessarily.

SEN. BERNIE SANDERS (I), VERMONT: We can't continue to refer to ourselves as a -- quote, unquote -- "free country" when the United States government is collecting information on virtually every telephone call made in America, getting into people's e-mails, focusing on the Web sites that certain people are visiting.

SCIUTTO: Sanders says he may be one of those people. He sent a letter to the NSA director, General Keith Alexander, asking -- quote -- "one very simple question. Has the NSA spied or is the NSA currently spying on members of Congress or other American elected officials?"

The NSA's only answer so far, that members of Congress have -- quote -- "the same privacy protections as all Americans."

Senator Rand Paul, another ardent critic of mass NSA spying, now wants to take the NSA to court with a class-action lawsuit.

SEN. RAND PAUL (R), KENTUCKY: A class-action lawsuit with hundreds of thousands of participants really beats home and brings to the forefront the idea that this is a generalized warrant and it should be considered unconstitutional.

(END VIDEOTAPE)

SCIUTTO: A senior administration official has given CNN some more details just now on where the White House stands. First on transferring that metadata back to telecommunications firms, this official says they have heard that some of these telecom firms have "significant concerns" about holding the data, so not necessarily willing partners on taking this data back from the NSA. One more recommendation from the panel had been regarding these national security letters which are kind of like subpoenas to access personal data, including phone records, but this senior administration official tells CNN that some intelligence agencies have concerns that that would raise the bar for intelligence cases above even where they are for criminal cases, so some pushback on that as well.

BLITZER: Lots going on. Jim Sciutto, thanks very much.

And the independent senator from Vermont is joining us right now, Senator Bernie Sanders.

Senator, thanks very much for coming in.

SANDERS: My pleasure.

BLITZER: You wrote a pretty strong letter to General Keith Alexander, the head of the NSA, and you asked if the NSA has or is spying on members of Congress right now. What prompted you to write this letter?

SANDERS: To be very honest with you, I was on a couple of TV shows here in the state of Vermont, and the journalists asked me, do you think that the NSA is spying on you? And my initial thought was, of course not.

But I thought about it, and I wasn't sure what the answer was. And being unsure about whether or not the NSA is spying on members of Congress made me think that it's imperative to get a flat, straight- out answer from these guys. What we do know, of course, is they have tapped the phones of foreign leaders around the world who are our allies.

I can remember back, as you can, Wolf, you know, 40 years ago , we had a president named Richard Nixon and he was prepared to do everything that he could to destroy his political opponents. And what I worry about is, if you have some other president like that or some rogue agent within the NSA, there's just an extraordinary amount of information and power that they can have over Congress, blackmail members of Congress, not a good situation.

BLITZER: I take it you have not yet received either a formal or informal reply from the NSA to your letter, is that right?

SANDERS: That is correct.

What did occur, apparently, is on Sunday night in response to media requests, the NSA issued a press release in which they said basically that members of Congress were being treated the same way the general public was, which means that information on us is also being compiled.

BLITZER: Well, what they say is that all these phone calls, they have the records of it, but they don't actually listen to the phone calls, they don't monitor the phone calls. If you were to get a phone call, for example, from some suspected terrorist in Somalia, then they might pay attention to what's going on, but people don't have to worry in general about the fact that they have collected this metadata, as it's called.

SANDERS: Well, you know, Wolf, that is suggesting that everybody at the NSA is and always will be wonderful, angelic, law-abiding human beings, but let me pose a different question. What happens if you have a rogue agent in the NSA?

What happens if you have a president, somebody like a Nixon, who has no scruples at all and wants to destroy his political opponents, wants to know what's going on in a political campaign, wants to hold a member of Congress, put him in a blackmail situation and leak information to a political opponent?

I think one doesn't have to be paranoid to be thinking that at some day in the future, that could happen. And I think when you have so much information being controlled by a secret agency, it is a real threat to American democracy.

BLITZER: But you have no reason to believe any of that, that worst- case scenario has already occurred?

SANDERS: That is correct. I have no reason to believe that. But I do worry about the potential of it happening some day, and if it does happen, obviously, it will be a real threat not only to our democracy, but to our political system as well.

BLITZER: What about Snowden? Do you think that he committed a crime or he was simply a well-intentioned whistle-blower?

SANDERS: Well, I think what you have to look at is -- I think there is no question that he committed a crime, obviously. He violated his oath and he leaked information.

On the other hand, what you have to weigh that against is the fact that he has gone a very long way in educating the people of our country and the people of the world about the power of private agency in terms of their surveillance over people of this country, over foreign leaders, and what they are doing.

So, I think you got to weigh the two. My own belief is that I think, I would hope that the United States government could kind of negotiate some plea bargain with him, some form of clemency. I think it wouldn't be a good idea or fair to him to have to spend his entire remaining life abroad, not being able to come back to his country.

So I would hope that there's a price that he has to pay, but I hope it is not a long prison sentence or exile from his country.

BLITZER: You wouldn't give him clemency, though, and let him off scot-free?

SANDERS: No. BLITZER: All right, Senator, thanks very much for joining us.

SANDERS: Thank you.

BLITZER: And just ahead, Hillary Clinton's secret strategy meeting. Politico calling it a shadow presidential campaign. I will speak with a reporter who broke the story.

(COMMERCIAL BREAK)

BLITZER: We have just been told the United States Senate is postponing a vote on extending unemployment benefits for three months. They have rescheduled the vote for 10:00 a.m. tomorrow morning on the Senate floor. It's apparently very, very tight right now. They need to pass this procedural hurdle in order to get it passed, three-month extension. We will see what happens tomorrow morning, but as of now the vote that had been scheduled, this initial procedural vote for today has been postponed, rescheduled for tomorrow, 10:00 a.m. Eastern.

A secret strategy with top Democratic consultants making a blunt appraisal of a possible White House run, we're now learning it took place early last summer with Hillary Clinton as she weighs another presidential campaign in 2016.

Maggie Haberman broke the story for Politico. And Maggie is joining us now live from New York.

Thanks very much, Maggie, for coming in. Excellent reporting, good work. Let's talk a little bit about what you learned. Hillary Clinton, she's always coy about whether or not she will seek the presidency a second time. But you have these details that she actually brought into her D.C. home, what, last summer, a group of high-powered political strategists to discuss some of the pros and cons. What's going on?

MAGGIE HABERMAN, POLITICO: So, Minyon Moore, who works with the Dewey Square group, and she's been an adviser to both Clintons actually for many, many years, helped convene this meeting of a bunch of her colleagues who are also very supportive of the work going on in one of the super PACs, Ready for Hillary.

They went through a very blunt numbers-based experiment. They weren't doing a client pitch. They were doing, here's what it would look like. Here's filing deadlines. Here's what you have to raise, here's what would be spent on television. One of them, a woman named Jill Alper, who is a veteran Democratic operative, has extensively studied attitudes about female candidates.

And I think that Mrs. Clinton is clearly doing what one would do if they were considering running for president. I do believe her when she says she has not made up her mind. I think that people are behaving as if she's going to run, but I don't think that means she will, but I think it's not hugely surprising that she is looking as closely as she is in terms of strategists putting together briefings and in terms of looking at the details. She's gathering information as she considers this.

BLITZER: One of the most fascinating parts of your article, Maggie, was that some of her closest aides and adviser, at least a couple you mention by name, are raising some flags. Maybe it's not necessarily a good idea for her to seek the Democratic presidential nomination.

HABERMAN: I think that their concern is more about her personal well- being and making sure that she makes a choice that's what she wants as opposed to either driven to do something by the desires of others or for some other consideration.

I think that if she does decide to run, those two advisers will help her get there and they're certainly helping her preserve the option to run, but I do think they're aware that the 2008 campaign was a mess of misery for everybody involved in that race, including the candidate, including her family, and I think that they after 30 years more of public service would like to see her really give thought to taking a rest if that's what she wants.

BLITZER: I want to play a little clip. This is the former President Bill Clinton speaking recently to CNN en Espanol and asked whether he believes his wife will run for the presidency again. Listen to this.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I think and she believes that the country should spend at least another year working very hard on the problems we have. We have very serious challenges in America. And we have responsibilities around the world. I think it's a big mistake -- this, you know, constant four-year peripatetic campaign, it's not good for America.

(END VIDEO CLIP)

BLITZER: The other issue that keeps coming up, at least in my private conversations, I assume with yours as well, remember, a year ago she did suffer a blood clot in her head, in her brain after fainting. Her health, what are you hearing about this? Because she's 66 years old.

HABERMAN: She's spending a lot more time focusing on, I think, on her health, on being well-rested, on taking care of herself. She's not obviously flying around at the pace she was when she was secretary of state.

And people around her say, no, no, this is not an issue, this is not something weighing on people's minds. However, as you say, she's 66, she did have this health issue. When you talk to people about what could prevent her from running again, one of the things that does come up is the unexpected. And a health issue is the unexpected. Right now, there doesn't appear to be anything, but it's obviously hard to predict for anyone what would happen in a year.

BLITZER: Maggie Haberman is a senior writer for Politico. You did an excellent piece of reporting there. Maggie, thanks for coming into THE SITUATION ROOM.

HABERMAN: Thank you.

BLITZER: Remember, you can always follow us on Twitter. Tweet me @WolfBlitzer. Tweet the show @CNNSITROOM.